Working together

The online retailers ranked in Internet Retailer’s Top 500 Guide rang up combined sales of $68.9 billion in 2005. They also built and maintained e-commerce sites that attracted more than 1.42 billion visitors per month last year.

Such significant numbers are a testament to the talent and resources that Top 500 merchants are committing to online retailing, the fastest growing segment of the U.S. retailing industry. But most Top 500 retailers didn’t build, and don’t maintain, their e-commerce sites entirely on their own. To sustain their substantial web retailing operation, the Top 500 e-retailers use applications and services provided by more than 200 vendors in 16 categories. For example, 49% of all Top 500 retailers use an e-commerce platform provided by a third-party application developer and 55% use an outside agency to manage their affiliate marketing program.

Third-party software and hardware developers and service providers make up an important component of the success of the Top 500 by supplying merchants with the products and services that keep total web retail sales growing by about 25% each year. Following is a special report on the biggest suppliers of e-commerce applications and services to the Top 500 retailers broken out by category.

Site Design
Designer web sites
Though site design is mostly an inside job, there are Top 500 retailers who need outside help with a new launch or complex redesign. Take the case of Fry Inc. which has designed or redesigned the web sites of 14 Top 500 retailers such as Spiegel Brands Inc. (No. 51) and Home Décor Products Inc. (No. 107). Demand for new features and upgrades is driving up the need for experts, says president David Fry. As a result, Fry has expanded its staff by 35% in the past year and now has 215 employees. Following Fry the next most utilized web site design firms among Top 500 retailers are GSI Commerce Inc. and MarketLive Inc., each with six clients.

Web Hosting
Perfect host
Top 500 retailers, especially the big box merchants with complex e-commerce sites that support multiple channels, depend on web hosting services for uninterrupted performance. As part of the third-party and turnkey services it provides to chain retailers and consumer brand manufacturers, GSI Commerce Inc. performs web hosting for 14 Top 500 retailers, including Linens ‘n Things Inc. (No. 115) and Ralph Lauren Media LLC (No. 101). Many Top 500 retailers prefer to delegate the crucial job of web hosting to established companies with deep roots in e-commerce and telecommunications. Yahoo Inc., AT&T Inc. and Savvis Inc. also provide Top 500 merchants with web hosting. Yahoo has a client list of 14 Top 500 retailers, while AT&T and Savvis have 11 each.

E-Commerce Platform
Powering up
An e-commerce platform is the engine that powers a web retailing site and the core system that Top 500 retailers use to connect to other shopping channels and back-end programs. In particular, 50 Top 500 retailers use the Microsoft Commerce Server e-commerce platform or .NET, Microsoft’s web services architecture, to drive and support their e-commerce sites. Direct marketer Redcats USA (No. 28) earlier this year rolled out a new e-commerce platform powered by .NET. The new platform hosts 12 web stores that receive about 40 million page views per day. Following Microsoft, the e-commerce platform providers most utilized by Top 500 merchants are GSI Commerce and Art Technology Group Inc, with 26 and 22 retailers, respectively.

Site Search Software
Finding things
Web shoppers want speedy site search and Top 500 retailers are responding with better tools such as guided navigation. A total of 55 retailers now use site search applications from Endeca Technologies Inc., while another 22 utilize search tools from EasyAsk Inc. Top 500 retailer West Marine Inc. (No. 240) recently added Endeca site search that gives customers additional ways to shop the boating supply retailer’s online inventory of more than 150,000 products. Customers can now shop for specific products more quickly and sort through the results by brand, price, sale items, new items and most popular products. “We wanted more precise search results,” says Tony Gasparich, vice president of direct sales. With better internal search, West Marine is also expanding its multi-channel retail efforts with a buy-online/pickup-in-store program. “We are expanding our commitment to the web,” Gasparich says. “A new internal search engine will help customers find what’s available in our inventory much quicker than before.”

Content Management System
Content king
Content is king on any web site, but when the URL is a Top 500 web site the content must be written, displayed and managed in ways that turn casual shoppers into motivated buyers. Most Top 500 web retailers do their own content management internally, but Interwoven Inc. is the most utilized application developer in the Top 500 Guide with 10 clients, including Staples Inc. (No. 3), Quixtar Inc. (No. 20) and Avon Products Inc. (No. 25). The next most utilized vendors are GSI Commerce and Scene7 Inc., each with eight Top 500 retailers. Top 500 retailers using Scene7 include The Home Depot Inc. (No. 41) and Limited Brands Inc. (No. 43).

Fulfillment
Fulfilling experience
Top 500 retailers use outside companies to help manage their fulfillment programs in a variety of ways. Some retailers choose a third-party service to manage their picking, packing and shipping operations. But others depend on outside companies such as Ecometry Corp. (now Escalate Retail), with 18 Top 500 retailers, GSI Commerce with 15 merchants and Accretive Commerce (formerly NewRoads Inc.) with 7, to help manage their overall order processing and warehousing programs. By using web-enabled technology from Accretive that integrates its returns system with other applications, including order management and fulfillment, Children’s Wear Digest Inc. (No. 374) reduced returns in some merchandising categories by as much as 50%. “We’ve tried to nip returns in the bud,” says CWD president James Klaus.

Order Management
Orderly process
Order management systems aren’t just for e-commerce any more. In fact, more Top 500 retailers such as Mountain Equipment Cooperative (No. 410) are using order management applications to expedite multi-channel retailing. A new Blue Martini order management and e-commerce system from Ecometry Corp., now Escalate Retail, enabled MEC.ca to launch an integrated wish list and gifts certificates program. The wish list enables customers to create a list tied to the company’s complete inventory system so shoppers can check the availability of stock online and in stores. Co-op members also can purchase gift certificates online and redeem them in Mountain Equipment’s 10 stores or at MEC.ca. Ecometry (Escalate Retail) has 24 Top 500 retailers using its order management applications, followed by GSI Commerce with 14 and CommercialWare Inc. with 9.

Payment Systems
Bite out of crime
Top 500 retailers depend on their payments processor for more than just a gateway service. Given the increase in online fraud, more Top 500 retailers count on their payments processors to provide them with fraud detection tools such as address verification and risk management systems. Chase Paymentech Solutions LLC provides gateway and other services, including address verification, transaction scoring, identity authentication and age verification, to 75 Top 500 retailers. Medium and large-sized merchants in general also employ twice the number of screening tools as smaller merchants and are two times as likely to use automated decision systems, says CyberSource Corp., the No. 2 provider of gateway and fraud detection services, with 41 Top 500 retailers.

Rich Media
Rich experience
The market leader is Scene7 whose clients include Office Depot (No. 2), QVC (No. 14) and Hammacher Schlemmer & Co. (No. 243). Hammacher is using rich media tools from Scene7, including dynamic sizing, zoom and online catalogs, to reduce the time and costs related to content publishing by 66%.  RichFX recently upgraded its suite of rich media tools to include several new features such as Express Loader, a media uploading application that streamlines rich media creation. Among the Top 500 retailers using RichFX applications are Costco Wholesale Corp. (No. 27) and J.C. Penney Co. (No. 13). 

Affiliate Marketing Management
Outside affiliation
Unlike other forms of online marketing they keep in-house, the majority of Top 500 retailers rely on outside firms to manage their affiliate marketing programs. Cases in point are affiliate marketing providers Commission Junction and LinkShare Corp. The two companies provide affiliate marketing services to 45% of the Top 500 retailers. Commission Junction has 138 Top 500 customers, followed by LinkShare with 85 clients. Rather than manage the job internally, Everything Furniture Inc. (No. 300), for instance, signed a multi-year arrangement with Commission Junction to oversee its network of several thousand affiliates. “The third party companies act as an intermediary and send payments directly, so affiliate web sites linking to us have an added convenience and trust factor,” says Everything Furniture CEO Scott Perry.

E-mail Marketing Management
Personalized message
Only 15% of Top 500 retailers use outside help to manage their e-mail marketing program. Most Top 500 retailers do their own copywriting and promotions. But many merchants also depend on outside firms such as CheetahMail, with 55 Top 500 clients, and DoubleClick Inc., with 26 Top 500 customers, to help out with list management and campaign management and analysis. Bass Pro Outdoor Online LLC (No. 77) is using e-mail templates designed by CheetahMail to send out personalized messages that include items within a defined price range that corresponds with items the customer earlier browsed or carted and abandoned. “These e-mails are very specific and the conversion rate is higher,” says David Seifert, director of marketing.

Search Engine Marketing Management
Outside help
With a typical Top 100 retailer spending as much as 50% of total online advertising budget on paid search, marketing managers want high click-through rates and strong sales conversions. But knowing the ins and outs of managing pay-per-click campaigns can be tricky, which is why 18 Top 500 retailers utilize Performics to manage their search engine marketing and another 10 use iCrossing Inc., a New York City digital marketing agency. Performics, a division of DoubleClick Inc., has several Top 100 clients, including HP Home and Home Office (No. 5), L.L. Bean Inc. (No. 22) and Blair Corp. (No. 95). Among the Top 500 retailers using iCrossing are Follett Higher Education Group (No. 71) and Omaha Steaks (No. 93).

CRM Systems
Know the customer
A good customer relationship management application is more than a data repository of shopper demographics. When it’s integrated with an e-commerce system, a CRM program can help a Top 500 retailer provide better customer service and streamline call center operations. Talisma Corp., a provider of CRM applications to eight Top 500 retailers, develops programs that integrate customer interaction histories and legacy CRM data. Top 500 retailers, including Macys.com (No. 29), use CRM applications from SSA Global Technologies Inc. to personalize customer interaction at the call center. “The system enables us to increase our marketing effectiveness through closed-loop campaign management and better customer insight and analytics,” says Macys.com president Kent Anderson. Blue Martini, a part of Ecometry/Escalate Retail, also has 7 Top 500 clients using its tools for CRM activities, including Bluefly Inc. (No. 129). SSA Global also has 7 Top 500 clients using CRM applications, including Zale Corp. (No. 226).

Web Analytics
Watching the numbers
Internet retailing is a numbers game and virtually every Top 500 retailer uses web analytics to help keep score. The largest analytics application developers, Coremetrics Inc. and Omniture Inc., which combined supply analytics programs to almost one-third of all Top 500 merchants, have enhanced their tools with advanced features that help retailers drill down and analyze buyer behavior. For instance, Benchmark Brands (No. 216) is now using web analytics from Coremetrics Inc. to spot and take action on page errors and reduce cart abandonment. Likewise 4inkjets.com (No. 285) is seeing higher sales after using Omniture analytics to examine high-volume and low-volume keywords along with high and low conversion rates for individual products.

Web Performance Monitoring
Watchful eye
Online retailers can ill afford slow-loading pages and downtime, which is a key reason 30% of all Top 500 retailers use a third-party application to monitor web site performance. Just in time for the 2006 holiday season, Keynote Systems Inc., which lists 31 Top 500 merchants as customers, is doubling the capacity of LoadPro, a load testing service that allows online retailers to simulate the activity of millions of site users. Gomez Inc., a provider of monitoring tools to 24 Top 500 retailers, also is enhancing its product suite. The company in June introduced an updated diagnostics program that provides a retailer with an executive summary and technical level detail on common web performance problems.

Content Delivery Network
Underlying support
By hiring a content delivery service, a retailer can manage temporary increases in traffic without sinking money into permanent infrastructure. A content delivery network also helps Top 500 retailers support the content and features online shoppers want more of: streaming media, customer reviews, interactive product displays, product configurators and enhanced images. Akamai Technologies Inc., which is utilized by 50 Top 500 retailers, has helped Quixtar Inc. (No. 20), and others improve their page loading speed and site availability. Mirror Image, a content delivery network used by 8 Top 500 merchants, recently helped Eastern Mountain Sports Inc. (No. 336) improve the speed of downloading pages without purchasing additional bandwidth.

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